senate Bill S. 1416

Should the FTC be able to Challenge Anti-Competitive ‘Product Hopping’ by Pharmaceutical Companies?

Argument in favor

Patent system abuse by pharmaceutical companies is one of the industry’s key tools for suppressing generic competition. Defining patent thicketing and product hopping will empower the Federal Trade Commission (FTC) to challenge these practices as anticompetitive and prevent companies’ abuse of the patent system.

Why would anyone deny the FTC any tools to monitor anticompetitive practices of any industry? It seems that patent thicketing and product hopping are legal tools employed by big pharma to gain unfair advantage over competitors. It is a prime example of Crony-Capitalism, where companies with resources succeed by gaming the system and purchasing political influence. Generally, I prefer Real Capitalism, where companies succeed by competing on a level playing field and 'win' by making better, more useful products and services than their competitors. As an example, I have to take a very expensive medicine which is packaged in a specially made gelatin capsule that will dissolve in the intestines and not the stomach. The generic formulation of this medicine is extremely economical but cannot be used in my case, since the special encapsulating gel capsule needed to deliver this medicine, is not. This seems ridiculous to me since the difference in costs are several orders of magnitude- to the point that I could not afford this medicine without really good (and expensive) supplementary insurance. I have to ask, Why?

Yes, the Pharmaceutical industry has abused the patent process for decades. They have used the system to delay the introduction of generic drugs and maintain extremely high prices.
By codifying the definitions of patent thicketing and product hopping the Federal Trade Commission (FTC) will be able to prosecute these anticompetitive practices.

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Argument opposed

Patenting products is a common practice across all industries. Specifically targeting the pharmaceutical industry for patenting its products discriminates against the industry and could have a chilling effect on innovation and new product development by both branded and generic pharmaceutical companies.

Only if they were run by responsible, patriotic individuals, which they, presently, are NOT ! Jim Cornyn is just another Pig and big corporations defender. Has to be something stinky about this bill. We must wait until responsible, patriotic, honestly elected officials are in place. Not the blindly following dingbats!

What is Senate Bill S. 1416?

This bill — the Affordable Prescriptions for Patients Act of 2019 — would codify definitions of “product hopping” and “patent thicketing” within the Federal Trade Commission Act. This would empower the FTC to challenge such practices as anticompetitive and enable the FTC to use its equitable remedy authority to keep companies from capitalizing on their abuse of the system.

“Drug companies have taken advantage of the patent system to maintain their monopoly on certain drugs and prevent generics from coming to market. These tactics mean Americans are forced to pay more for the life-saving medications they need. This bill puts patients first and reforms the system to encourage the availability of cheaper generics.”

“Using practices that would make the robber barons of the gilded age blush, Big Pharma has crushed competition and stifled access to cheaper generic drugs to squeeze billions out of families, businesses, and the government. Through common sense reforms, this bipartisan bill will empower the FTC to fight back against drug companies’ most egregious and monopolistic practices. It represents an important step in reining in Big Pharma’s greed and puts the industry on notice—enough is enough.”

“AAM commends Senators John Cornyn (R-TX) and Richard Blumenthal (D-CT) for seeking to address two significant obstacles to generic drug and biosimilar competition: product-hopping and the creation of patent thickets. Brand-name drug companies are able to employ these strategies to prevent automatic substitution of generics and extend brand-name drug monopolies – and high prices – for decades. AAM appreciates Senators Cornyn and Blumenthal for investigating and seeking to address abuses of the patent system by some brand-name drug companies, and we look forward to working with them to ensure that the patent system is balanced and works in the best interest of patients who seek more affordable prescription medicines.”

“We are committed to working with Senators Cornyn and Blumenthal to address potential outlier behavior. As drafted, however, this legislation fails to appreciate the role and importance of medical advances post-FDA approval to patients, competition and the health care system. Virtually any innovation made after filing of an original new drug application or biologics license application would be presumed to be anti-competitive and could be subject to significant new and existing penalties under the FTC Act. It would exponentially increase uncertainties for innovative biopharmaceutical companies, which could lead to the net result being less innovation and less competition. PhRMA strongly supports policies that foster a robust, competitive market for generic and biosimilar medicines while providing needed incentives for continued biopharmaceutical innovation. Unfortunately, this legislation as drafted would fundamentally upend the biopharmaceutical innovation ecosystem, creating a presumption of violation for almost any post-approval innovation.”

The Institute for Policy Innovation and a coalition of other organizations, including the American Conservative Union, ALEC Action and Independent Women’s Voice, wrote a letter to Sen. Cornyn expressing concerns about this bill:

“Under [this] bill, almost any incremental innovation made after filing of an original new drug application or biologics license application would be presumed to be anti-competitive and subject to penalties. By classifying incremental innovation as anti-competitive, [this] legislation erodes incentives and threatens innovation. These provisions should be of grave concern to proponents of limited government. But perhaps most ominous is the threat posed to continued medical innovation. Beyond discouraging incremental improvements in biopharma products, [this] legislation actually assumes incremental improvement to be suspect. The most notable losers are the patients who would have benefitted from such improvements.”

“Product hopping” takes advantage of the FDA approval system to get around pharmacy-level generic substitution laws. When a drugmaker makes a new version (such as a minor reformulation) of a drug, the generic version of the old drug can’t be substituted for the new drug because the generic is tied to the old version. Sometimes, according to Sen. Cornyn’s office, the manufacturer will so so far as to remove the old version from the market completely, leaving the generic with nowhere to go as patients are forcibly switched to the new branded drug.

“Patent thicketing” is a practice in which manufacturers take advantage of the complex interplay of different kinds of patents (methods of manufacture, formulations, devices, uses, as well as the underlying composition of matter patents) that are inherent to one drug to deploy patents strategically to prevent competition. This forces would-be competitors to fight through what can sometimes be hundreds of patents before their drugs can be approved. According to Bloomberg, patent thickets are mostly confined to biologic drugs made from living organisms, as such biologics are more complex to manufacture and therefore offer drugmakers more manufacturing steps to patent.

Why would anyone deny the FTC any tools to monitor anticompetitive practices of any industry? It seems that patent thicketing and product hopping are legal tools employed by big pharma to gain unfair advantage over competitors. It is a prime example of Crony-Capitalism, where companies with resources succeed by gaming the system and purchasing political influence. Generally, I prefer Real Capitalism, where companies succeed by competing on a level playing field and 'win' by making better, more useful products and services than their competitors. As an example, I have to take a very expensive medicine which is packaged in a specially made gelatin capsule that will dissolve in the intestines and not the stomach. The generic formulation of this medicine is extremely economical but cannot be used in my case, since the special encapsulating gel capsule needed to deliver this medicine, is not. This seems ridiculous to me since the difference in costs are several orders of magnitude- to the point that I could not afford this medicine without really good (and expensive) supplementary insurance. I have to ask, Why?

Only if they were run by responsible, patriotic individuals, which they, presently, are NOT ! Jim Cornyn is just another Pig and big corporations defender. Has to be something stinky about this bill. We must wait until responsible, patriotic, honestly elected officials are in place. Not the blindly following dingbats!

Yes, the Pharmaceutical industry has abused the patent process for decades. They have used the system to delay the introduction of generic drugs and maintain extremely high prices.
By codifying the definitions of patent thicketing and product hopping the Federal Trade Commission (FTC) will be able to prosecute these anticompetitive practices.

Yes, this will help to create healthy competition for pharmaceuticals and lower prices for consumers. You could also allow us to buy drugs from Canada. Medicare For All would give the government the power to negotiate the lowest drug prices. 😊

I agree with the FTC having this authority, but where do the fines the FTC collect go? I have never received a portion of the billions of dollars in fines this agency has collected as a result of action being take by a product or service I used. For example, anyone get their portion of the fines Facebook paid for misusing our data???

The function of the FTC, in part, is to monitor industries for monopolistic and anticompetitive practices. This legislation empowers the FTC to do a better job in the pharmaceutical industry.
This situation is particularly bad because medicine is something people need to maintain their health. The cost of not taking medicine that you need is enormous, to you and everyone else.
An explanation follows (TLDR for most):
Economics’ basic supply-demand model assumes (perfectly—not going into details) competitive markets. When the pharmaceutical industry uses business practices to prevent competition, it causes a market failure. They get to scoop up all the benefits and share little with consumers or government. You can tell that’s the situation here because of tactics like the ones the legislation is trying to bring under control and what it does to prices.
When there is market failure, the government needs to correct it. Companies and industries don’t have an incentive to be self-correcting. (We saw that with the 2007-2008 financial disaster, and even Allen Greenspan owned up to it. Fat lot of good that did after the fact.)
What’s worse is that the current situation causes negative impacts on consumers. We bear the cost, and the companies reap the profits. The whole mess ripples through and has a negative impact on the entire economy.
The real solution is to recognize that health care is a public good, just like your local fire department. And that leads to universal health care, like others have written. Long-winded and technical, but it’s worth understanding the background, if you want to.

Anticompetitive? Try monopolistic. That’s the ground the pharmaceutical companies currently stand on. They are about money and only money; pharmaceutical companies couldn’t care less about their customers’ health, only their money.